Most insurance companies are moving towards asking the insurance agent NOT to send copies of certificate of insurance to the carrier. The insurance companies suggest that they don’t want the paperwork and it is not necessary. We recommend that insurance agents and brokers ALWAYS SEND THE CERTIFICATE OF INSURANCE TO THE CARRIER REGARDLESS OF IF THEY WANT IT. I don’t know the overall statistics for the industry but in our office at least 20% of the claims relate to some type of certificate of insurance. Some common examples of denied claims relating to Certificates of Insurance are as follows:
1. Additional named insured not listed or listed and not approved by the carrier: This is a very common claim. Carriers will look at the Certificate of Insurance and determine if they are eligible for coverage or if the agent exceeded their authority. We have had many claims where the additional insured (AI) was ineligible based on their class of business or relationship to the carrier and thus the carrier denied the claim.
2. Named insured left off the certificate of insurance: Often clients will reorganize, or form a new entity during the year. Frequently they will not inform the agent until they discuss renewal. In the meantime a claim occurs. Carriers will often deny claims if they have not been notified of the new entity, even if the agent provided a certificate with the new entity listed.
3. Loss Payee not recorded by the carrier: Often a loss payee will be added midterm to a policy and then not endorsed on the renewal. Even though the carrier may have been originally informed of the addition, they omit adding the endorsement on renewal. The agent may believe that the loss payee was recorded by the carrier, however, it is not recorded.
4. Wholesaler does not notify the carrier. Many times the retailer will provide the COI to the wholesaler who also is informed by the carrier not to provide them with Certificates of Insurance. Again, claims can be denied because the carrier does not have a record of the correct additional or named Insureds. Because an actually agency relationship does not exist between the carrier and the agent, often the carrier can deny the claim.
In many of the above cases, the carrier winds up paying the claim and then sues the agent for misrepresenting the policy or exceeding their authority. One big issue with this is that some
E&O insurance policies exclude claims relating to exceeding authority. But that’s a topic for another day